A burned-out vehicle stands during the Camp Fire in Paradise, California, U.S., on Tuesday, Nov. 13, 2018. The Camp Fire north of Sacramento has now killed at least 42 people, injured three firefighters and destroyed 6,500 homes, CalFire said Tuesday morning.

An all-star team of seven partners from Cravath, Swaine & Moore led by firm chairman Evan Chesler will serve as lead litigation counsel for PG&E Corp. as the California utility prepares to file for Chapter 11 bankruptcy protection.

They’ve got their work cut out for them.

In addition to Chesler, the Cravath litigation team includes partners Julie North, Darin McAtee, Timothy Cameron, Kevin Orsini, Omid Nasab and Damaris Hernández.

Lawyers from Simpson Thacher & Bartlett are advising the independent directors of PG&E's board on litigation-related issues.

Looming liability for a series of devastating wildfires is PG&E’s overwhelming concern, as the company made clear in its news release announcing its bankruptcy.

“PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires,” the news release states—one of four times the phrase “potential liabilities” appears in the document.

And no wonder. The company says it could be on the hook for $30 billion or more—and its insurance won’t come anywhere close to covering the tab.

In a Jan. 13 securities filing, the company said it has $840 million in insurance coverage for fire-related liability between August 1, 2017 and July 31, 2018—a period that includes the North Bay fires—and $1.4 billion in coverage for fires between August 1, 2018 and July 31, 2019. That period includes the Camp Fire, which killed at least 86 people and destroyed more than 18,000 structures, making it the deadliest and most destructive fire in California history.

State officials have not determined the cause of the Camp Fire, but PG&E has admitted that 15 minutes before it started, a high voltage power line near the ignition point suddenly stopped working, and that a suspension insulator separated from the tower.

Plaintiffs lawyers have been almost as quick to file lawsuits seeking to hold PG&E liable. The utility says it faces about 50 complaints to date stemming from the Camp Fire—six seeking class action status—on behalf of 2,000 plaintiffs. That’s on top of 700 complaints—including five putative class actions—on behalf of at least 3,600 plaintiffs related to the 2017 North Bay wildfires.

And insurance companies have filed 41 subrogation complaints in San Francisco County Superior Court, seeking reimbursement for billions in property damage claims that they’ve paid out.

There’s more. Governments including the counties of Sonoma, Napa and Mendocino and the city of Santa Rosa have sued PG&E too, claiming damages such as loss of natural resources, loss of public parks and fire suppression costs.

The reorganization will allow the utility to consolidate the claims before a bankruptcy judge.

The company’s CEO stepped down on Sunday, and general counsel John Simon is serving as interim CEO.

A Georgetown Law graduate, Simon worked as a commercial litigator at Proskauer Rose in Washington, D.C. before going in-house at TeleTech Holdings, Inc. He joined PG&E in 2007, holding several senior positions within the company.

Looking back, PG&E might have found a way out other than Chapter 11 if it had been able to dodge strict liability under the doctrine of inverse condemnation.

It’s an obscure area of eminent domain law, giving private parties the right to compensation from a public entity if their property is “damaged” for public use.

Electricity is an “improvement for public use.” The idea is that we all benefit from power transmitted on lines, so we should share the burden when something goes wrong (like a power line setting a forest on fire).

But PG&E isn’t a public entity with tax revenue to fall back on. It’s a private corporation, and as such, it’s limited in its ability to spread inverse condemnation liability costs across its ratepayers.

PG&E is only allowed to raise its rates if its regulator, the California Public Utilities Commission, says it’s OK. And that’s not a given.

Represented by Cravath’s Chesler as well as Quinn Emanuel Urquhart & Sullivan’s Kathleen Sullivan, PG&E earlier this year asked the California Supreme Court to reverse lower court rulings that held the utility strictly liable based on inverse condemnation stemming from the Butte Fire in 2015 and the North Bay fires in 2017.

On Nov. 14, the state high court declined PG&E’s petition for review.

That didn’t leave PG&E with a lot of options. The state legislature did provide a way for PG&E to securitize its 2017 liabilities, but the law didn’t cover 2018.

“We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion,” Simon said.

 

 

Lateral Watch

Quinn Emanuel has nabbed Sandra Moser, who stepped down Friday as acting chief of the Justice Department’s criminal division’s fraud section.

“I talked to one firm and one firm only, which was Quinn,” Moser told my colleague C. Ryan Barber. “There’s certainly a tremendous number of terrific firms that have offices in D.C., but Quinn’s got a really unique combination in terms of their stellar and aggressive white-collar defense practice and the fact that they take on the big Wall Street banks as well.”

She joins Quinn as co-head of the firm’s global white-collar practice and its crisis law and strategy group.

For more, see DOJ's Moser Joins Quinn Emanuel As Practice Leader, Will Advise Clients in Mueller Matters

 

Gibson, Dunn & Crutcher lured litigation partner Shireen Barday from Kirkland & Ellis, describing her as “young star in the New York litigation bar.”

“I’ve done a tremendous amount of Delaware litigation during my career. I am a generalist with a sort of specialty in business litigation, and joining Gibson Dunn offered an opportunity for me to marry my practice with a larger one,” Barday told The American Lawyer.

For more, see Gibson Dunn Gains Commercial Litigator From Kirkland & Ellis

 

What I’m Reading

Google Shareholder Suits Latest in Wave of #MeToo Derivative Actions

Recent shareholder lawsuits filed in San Mateo Superior Court in California accuse board members of Google parent company Alphabet of breaching their fiduciary duty by covering up a lengthy pattern of gender discrimination and sexual harassment perpetrated by Google executives.

Public Justice Lawyer Says Home Depot Case Could Move 'Tons of Individual Cases' to Federal Court

“If you change around the word ‘defendant’ so it covers third-party defendants, then all of a sudden nearly every sizable personal injury case or products liability case would be easy to force in federal court and get out of state court.”

California Appeals Judge Accused of Groping Colleagues Faces Misconduct Charges

Los Angeles-based appellate justice Jeffrey W. Johnson faces charges of inappropriately touching or making sexually suggestive or inappropriate comments to more than a dozen women who worked in and around the court, including two Second District justices.

FedEx to Pay $35 Million to Settle Charges of Shipping Untaxed Cigarettes to New York

“Not only did FedEx violate laws created to protect the public from the serious health risks associated with cigarettes, but they also swindled New York City and state out of millions of dollars in tax revenue,” said NY AG Letitia James.

Judge Blocks Trump Administration's Religious and Moral Exceptions to ACA's Birth Control Mandate

U.S. District Judge Wendy Beetlestone of the Eastern District of Pennsylvania granted a nationwide preliminary injunction late Monday barring the federal government from enforcing a version of the ACA that allowed for greatly expanded exceptions to the requirement that companies help cover the cost of contraceptives.

Barr Promises Mueller 'Will Be Allowed to Complete His Work'

“If confirmed, I will not permit partisan politics, personal interests, or any other improper consideration to interfere with this or any other investigation,” Barr will tell senators on Tuesday, according to his prepared testimony.

 

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